Whoa, have vs. have-not {money geek talk}

[on-ramp]

Originally posted by Hugh R
Assets=Liability + Equity. Equity = Net Worth.

doing some basic algebra with your equations and we can conclude:

Net Worth = Assets - Liabilities.

[on-ramp]

Originally posted by tobster1911


I just wanted to point out that the world is about to end. I personally am taking the rest of the day off, buying a lottery ticket, and going to kiss my wife.....

That is all.

haha! very funny. we can agree on some topics and disagree on others.

after all, we're not politicians here, who take sides no matter what.

[Nathans_Dad]

Originally posted by artplumber
Rick,
I don't think that these are individual decisions. The pervasive nature of advertising is where to lay the blame. Instead of a nation of producers, the US has become a nation of consumers, which is great for companies, but not for the nation. People have become conditioned to think that they should own huge homes, drive cars that are not less than 2 years old and buy the latest gadgets. It is high school (look I'm in the "in" group) to the Nth degree. Because of the frenetic attempts by the majority of this population to out-buy their neighbors, eventually the economy will come crashing down. Why? Look at the trade deficit and how much is owed to China. They don't care if you didn't buy much on credit. When they call in the debt your US dollars won't be worth the paper they are printed on.

Art, while I agree that the marketing machine has perfected its craft, I'm not sure what you think should be done about it. Corporations exist to make money, pure and simple. It is their job to make as much money as possible for their shareholders. That means advertising. Just because they are good at it is not a reason to relieve the overindulgent consumer of blame.

Where is the self control in this country?? I want a new Porsche, but I don't run out and buy one...

[Hugh R]

Originally posted by on-ramp
doing some basic algebra with your equations and we can conclude:

Net Worth = Assets - Liabilities.

Exactly, if you've taken a basic accounting class that is one of the first things they teach you. Don't confuse assets with net worth, they're not the same, but the press doesn't seem to understand this. Case in point.. A credit union advertises that it has assets of 2 billion dollars. They usually have most of it loaned out (minus some minimum governement retention) that means they have about 1 billion in deposits and about (but not quite) 1 billion in loans, hence assets of 2 billion. Not arguing the overall concept of the thread, just make sure when you talk about "assets" you know what your talking about. Ask any CPA if you don't believe me.

[artplumber]

Originally posted by Nathans_Dad
Art, while I agree that the marketing machine has perfected its craft, I'm not sure what you think should be done about it. Corporations exist to make money, pure and simple. It is their job to make as much money as possible for their shareholders. That means advertising. Just because they are good at it is not a reason to relieve the overindulgent consumer of blame.

C'mon Rick, you get bombarded by something constantly, and it becomes part of your lexicon. Don't tell me you don't believe that kids that play violent videogames are more desensitized than those who don't. You keep getting hit with images of excess, and they do become part of you. Look at these silly shows like the wives of the OC or whatever.

As for the PLAN...Hmmm, I didn't actually state a plan, brainstorming...

1. No tax breaks for interest on home mortgages above a certain level (actually kind of happening with the AMT)

2. Tighten up the financing laws, and interest rates (obviously this may cause a recession) - essentially making it harder for poor risk people to get any credit.

3. Tax the heck out of imports (also could cause a recession).

4. Tax the advertising industry separately.

5. Eliminate income taxes and go with a pure VAT.

6. They've already eliminated some stuff like bankruptcy to avoid debt.

7. Force manufacturers to deal with recycling their products which become trash - I'm thinking electronics here, not guns.

The problem with all this stuff, unfortunately, is that it flies in the face of the current valuation system. A company is valued for more sales, almost more so, than its profit margin. America/stock market is still stuck on more # = better rather more quality = better.

I'm sure the anarchists among us will love the above ideas.

[turbo6bar]

Let's put some numbers on this, then.

According to the Census Bureau, there are approximately 110 million households.

Additionally, the Census Bureau states that total household financial assets for 2005 is $38 trillion (includes stocks, bonds, pension funds, etc), and total household liabilities is $11.9 trillion for 2005.

The numbers are from 2007 Statistical Abstract: Census Bureau

Let's calculate the numbers based on the claim:

the top 1% of householders hold 30% of the assets and 7% of the debt, while the bottom 50% hold a mere 6% of assets but a burdensome 24% of the debt.

Therefore, the top 1% (1.1 million households) have total assets of $11.4 trillion and total debt of $0.833 trillion. The bottom 50% of households (55 million households) have $2.28 trillion in assets and $2.86 trillion in debt.

If the statistics represent truth, then the middle class is like the dinosaurs a few years before extinction. This may not be a bunch of lazy, stupid people making stupid choices in life. Generally, half the nation's households are financially upside down.

In case you were wondering, I'm not offering solutions. I'm just whining.

[gprsh924]

Originally posted by turbo6bar
This may not be a bunch of lazy, stupid people making stupid choices in life. Generally, half the nation's households are financially upside down.

It doesnt necessarily mean that they are lazy, but it leans pretty heavily towards being stupid. If you don't realize that you arent making good financial decisions by putting yourself into significant debt just so you can have a 50" plasma instead of that 42", then you are not smart.

My grandparents are a prime example of this. In the 70's my grandpa was making over 200K a year. Today, I am 18 and I have more money in the bank than he does. They just bought every thing in sight. When my dad was 16 his family had 8 cars for 3 drivers. They had no idea how to save. You dont have to make a ton of money to not be up to your eyeballs in debt, you just have to live within your means

[LeeH]

Originally posted by artplumber
As for the PLAN...Hmmm, I didn't actually state a plan, brainstorming....

Financial literacy is key, but nothing is likely to happen soon to change things. Parents should be teaching their children about money, but the parents don't have the knowledge themselves. It's a downward spiral.

I witnessed a father/adult son conversation about the son's new car purchase. It went something like this:

Dad: "Hey, did you get a deal on the car? What are your payments."
Son: "Only $350/month!"
Dad: "Way to go!"

If dad had a clue he would have asked about the interest rate, length of the loan, how much did he put down, what's the total cost of credit, etc, etc. All Pa had to hear was the payment to be satisfied that junior got a good deal.

It bugs me that some of my closest friends will never be able to retire. Currently they live in larger homes, take better vacations, buy more stuff, etc, than we do, but it kills me that these guys who are in there 40s have zero or negative net worths.

[Howard Agency]

And a balance sheet can be misleading, too. While it's nice to have a ton of equity in your home/cars/art collection, those are just ongoing expenses until they are sold. The real test of wealth is earning assets.

That aside, I'm still boggled that more than half of the population is upside down. Downright scary..

[Nathans_Dad]

Originally posted by artplumber
'mon Rick, you get bombarded by something constantly, and it becomes part of your lexicon. Don't tell me you don't believe that kids that play violent videogames are more desensitized than those who don't. You keep getting hit with images of excess, and they do become part of you. Look at these silly shows like the wives of the OC or whatever.

Of course it becomes part of the lexicon. I'm not saying that the advertising machine isn't out of control, it is. The question is what do you do about it? Do you regulate what can be advertised a la tobacco? Where does that regulation stop? If your interest is in keeping middle class families from going into debt, you should not allow advertisments for expensive cars, or jewelry, or electronics. Credit card ads would obviously go, as would ads for expensive restaurants. Oh, forget about advertising for vacations, Disneyland, the Bahamas, etc. Those all cost money. Airlines? Out. Take the bus. Cell phones? Ban them. They cost too much and people can use pay phones. See what I mean? Where do you finally stop? At what point do you finally say "Ok, you have to act like a grown up now"?

Originally posted by artplumber
As for the PLAN...Hmmm, I didn't actually state a plan, brainstorming...

1. No tax breaks for interest on home mortgages above a certain level (actually kind of happening with the AMT)

The problem I have with this are two: First even though if you set the home price high enough (like $1 million) you would essentially only be increasing the taxes on the rich, I have a problem with that. You are penalizing people for success. Bad idea. Also, if you really want to help the "middle class" and discourage them from buying homes out of their range you would have to remove tax breaks on all homes with purchase prices above say $250k. Not only would this tax a large percentage of the population, it would cause a real estate crash like you have never seen before.

Originally posted by artplumber
2. Tighten up the financing laws, and interest rates (obviously this may cause a recession) - essentially making it harder for poor risk people to get any credit.

This one I think is a good idea. It is far too easy to get credit these days, tightening up the rules for credit card issuance is a good move. Yes, it would cause a recession due to drops in consumer spending.

Originally posted by artplumber
3. Tax the heck out of imports (also could cause a recession).

Not could cause, would cause a recession or worse.

Originally posted by artplumber
4. Tax the advertising industry separately.

Tax them for what?

Originally posted by artplumber
5. Eliminate income taxes and go with a pure VAT.

I agree with eliminating income tax as it stands now, but I would favor a flat tax across the board instead of a VAT or federal sales tax.


I guess my concern here is that when you start making government policy to curb individual choices you start on a slippery slope. Of course our government has already started down that slope with taxes on tobacco and alcohol, laws against the sex industry, etc. I'm not saying those ideas are bad or even that some of the ideas for helping people stay out of debt are bad. I hope that we don't end up in a future where we all eat a government mandated diet (to avoid health risks), drive government mandated cars (to save on fuel and improve driver safety), watch government mandated TV, and wear government mandated clothing.

[Hetmann]

Lenders need to be a little more responsible about handing out credit. If Joe sixpack isn't smart enough to manage all that credit without getting himself hopelessly in the hole, don't extend the credit to him.

[berettafan]

Coupla points and thoughts;
-in banking, deposits are a liability, not an asset.
-AK-47's (amongst others) should not be polished but oiled instead.
-90% of the rich people i know got there by being born to the right circumstances. they are given opportunities by other rich folks who assume anyone who is rich must know what they are doing. not always the case, but hey, who's keeping track. once GIVEN that first million or whatever it takes very little skill to make it grow quickly.
-A-L=E. My grocery store doesn't accept E as payment for food.
-i wonder just how many people are in fact spending away with the thought that akhmed is going to start WW3 in the coming months and it will all be over anyways.
-WTF was that guard thinking when he left Jack's dad alone with his son?!

[tsinger873]

Was Berettafan watching 24 on a large screen tv, sitting on a leather la-z-boy, in a million dollar house, all paid for on credit?

[berettafan]

Well the rent-a-center people found me so no more leather couch and big screen

[artplumber]

Originally posted by Wayne at Pelican Parts
....

The school system sets people up to fail by not giving them *real* information that they need to function in a capitalistic society.

-Wayne

Well I guess I'm just a pessimist. Education seems to do little for these folks IMO. As long as they can buy 50" Plasmas today, even if it might cost them tomorrow, today is when they will buy it. The idea of financial pain just isn't enough to get them beyond the immediate gratification. They must experience the mistake, and even then a significant number can't learn the lesson of deferred rewards. Just look at how many are leaving school without degrees, or worthless ones - delayed gratification doesn't play well in the public.

BTW Wayne, if the dollar tanks, the economy will tank too. Once all the industries which have been exported can get built/running again, (resulting in a trade surplus since the dollar is so devalued), then the economy will truly be back on the road to health. Problem is there is India, and China, and most of Africa that all would love to provide cheap labor for a while. Since birth control is almost absent in all but China (where there are so durn many people anyway), labor is going to get cheap for a long time.

[KFC911]

Originally posted by slakjaw
I am a have-not.

I tend to agree with Wayne...I dare say that everyone on this site would fall into the 'have' category...albeit, some are MUCH more "havier" (I just made that word up) than others

ps: I'm NOT in that category however...

[berettafan]

Originally posted by Wayne at Pelican Parts
Actually, it doesn't. 99.9% of the people out there don't realize this, but the interest on a home equity loan or a cash-out refinance is *not* tax deductible, unless you use the funds specifically for improvement to the property. If you use it to buy a new Hummer or a boat, then you cannot deduct the mortgage interest on your taxes, legally. A gazillion people do this incorrectly, and it's only a matter of time before the IRS starts auditing people to collect these funds. My highly-intelligent financial planner *and* my extremely good business account have both independently confirmed this.

-Wayne

Sorry Wayne, but this is incorrect. Stick with CPA's for tax advice.

[berettafan]

Oh, and a 'here here' on teaching basic financial skills in high school!

I got it in an optional accounting class. Shouldn't be optional, that is for sure.

[on-ramp]

Originally posted by berettafan
Sorry Wayne, but this is incorrect. Stick with CPA's for tax advice.

yeah, the interest on a home equity loan is tax deductible, in most cases, up to $100,000